Incannex Healthcare: Is life better on Nasdaq?

Incannex Healthcare has announced plans to redomicile to the US, in a move designed to access deeper pools of capital and increase its long-term market valuation.

A newly formed corporation will become Incannex’s parent and issue shares on Nasdaq, in exchange for all Incannex’s existing common shares. The biotech, which is currently dual-listed, and based in Australia, will continue to focus on developing medicinal cannabis and psychedelic therapies.

Management believes the move will give the business greater access to a larger capital market and increase awareness of Incannex’s equity story, with the company noting in its announcement that peer companies trade at ‘significantly higher valuations’.

Incannex has spent the last 18 months engaging more intensely with US investors. On 6 July, the volume of its American depositary receipts (ADRs) traded was equivalent to 160 million Incannex shares, despite the company having less than 1.5% of its securities trading as ADRs in the US. Each ADR represents 25 of the existing common shares of Incannex.

Increased US trading came after the interim trial analysis from its study into the safety and efficacy of psilocybin in psychotherapy was released in March. The business is now opening its first ‘psychedelic clinic’ in Melbourne, in collaboration with Australian psychedelic clinical experts, using psilocybin for treatment-resistant depression and MDMA for post-traumatic stress disorder. It is expected to open and take patients from September.

Incannex has also attracted attention with plans for its IHL-42X product candidate to disrupt market for the treatment of obstructive sleep apnea (OSA). Edison’s research suggests that moderate to severe OSA affects 11% of men and 5% of women in the US. Other potential therapies are targeting trauma and inflammatory conditions. It has also received Australian regulatory approval for a Phase II clinical trial into the treatment of pain and function in rheumatoid arthritis.

Management hopes that shifting its presence to the US will increase its visibility to international investors, allowing it to be more easily compared with similar biotech companies across North America, as well as giving improved access to large pools of lower-cost equity capital over the long term, potentially enabling future growth to be financed at a lower cost.

Incannex believes the transaction may also provide greater alignment with ‘prominent pharmaceutical companies’ and says the resulting simplified corporate structure will better position it for future potential mergers or acquisitions.

In media coverage around the announcement, Incannex CEO Joel Latham said the announcement was a ‘landmark’ decision and confirmed it was made unanimously by the company’s board with the intention to maximize shareholder value.

He added that increases in the price of the US-listed ADRs had been pulled back due to arbitrage with the Australia-listed stock. He believes redomiciling and moving to Nasdaq will lead to greater liquidity and address what he believes is the company’s undervaluation, compared to peers.

Incannex shareholders will have the opportunity to vote in October on the proposal to redomicile to the US.

Find out more about Incannex Healthcare’s investment case by reading Edison’s latest updates

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